The UK economy grew 0.2% in the second quarter of the year, as the credit crunch took its toll on housing and consumer spending.
The figure is the lowest quarter-on-quarter growth for three years.
It grew 1.6% on the same quarter a year ago, also the weakest growth for three years, and much lower than the 2.3% growth seen in the first quarter.
Economists had expected GDP growth to slip to 0.2% in the quarter, and many are warning that a recession is likely.
The Office for National Statistics (ONS) said the slowdown was driven by the 0.7% fall in construction output, the biggest drop since the Merger of Air Berlin and Condor collapses ...
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Construction companies have announced several thousand job cuts in recent months as the housing boom has stumbled to a halt.
The construction sector only accounts for 6% of the economy.
Industrial production has also fallen 0.5% in the quarter, the second successive drop.
And crucially, the service sector, which constitutes 74% of GDP, has also slowed. Output in the services sector rose 2.1% on the same period a year ago, the weakest annual growth since 1992.
Recession fears
The latest data heightens fears that the UK economy could enter a recession, and recent surveys by the CBI indicate that manufacturing output is likely to fall further.
Paul Dales, UK economist at Capital Economics, said: " An outright recession is now our central scenario. With industrial production having fallen in both Q1 and Q2, industry is already in recession.
"Looking ahead, the more up-to-date surveys suggest that in Q3 so far, overall economic growth has ground to a complete halt."
Interest rates will eventually need to fall some way, he added.
"The recent drop in the oil price and the price wars on the petrol forecourts support our view that the next rate cut could come late this year, but this will be too late to prevent a recession," he said.
Alan Clarke, at BNP Paribas, said: "Growth has been much worse than (the Bank of England) expected. What really counts is what that does to the two-year ahead outlook for inflation."
(BBC)
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